White House economic and energy officials have privately expressed concern that the wind subsidies in the stimulus aren't doing very much but enrich some companies. The Wall Street Journal editorial page got its hands on the memo, and today's editorial [behind a paywall, sadly] is an important read.
The memo, written by Larry Summers, Carol Browner, and Ron Klain, discuss how stimulus subsidies are going to projects that would have happened anyway, and in which government ends up bearing most of the risk (while, of course, the private companies get all the profit).
We call this corporate welfare, and the stimulus was full of it. The case study in the memo is a GE wind farm in Oregon. The Journal editorial sums it up:
So here we have the government already paying for 65% of a project that doesn't even meet its normal cost-benefit test, and then the White House has to referee when one of the largest corporations in the world (GE) importunes the Administration to move faster by threatening to find a private financial substitute like any other business. Remind us again why taxpayers should pay for this kind of corporate welfare?
But the Summers memo answers that last question, the editorial points out:
“Failing to make progress on renewables loan guarantees could upset the Hill ([New Mexico] Sen. [Jeff] Bingaman, Speaker Pelosi)” and changes could “signal the failure of a Recovery Act program that has been featured prominently by the Administration.”
I want to add a couple of details:
1) One stimulus subsidy for wind was the “Investment Tax Credit.” Unlike the “Production Tax Credit,” the ITC enables GE to get its wind subsidy just for building a windmill — even if it never spins. Also, the “tax credit” is payable up front, in cash from the Department of Energy. In other words, it's not really a tax credit, but it's corporate welfare — build a windmill, and the taxpayers cut you a check.
2) This corporate welfare for GE pokes yet another hole in Obama's consistent claim to be battling the special interests. GE spends more on lobbying than any other corporation.
3) This memo further confirms my reading of the complaints by GE's Jeff Immelt, that the administration wasn't being pro-business enough. I've written repeatedly (here, here, and here) that Immelt wasn't criticizing Obama for being too interventionist, but for being too laissez-faire. The WSJ's new evidence in this direction: “GE said it was considering 'going to the private market for financing out of frustration with the review process.' Anything but that.”